Micron Technology Inc. (MU) - Get Report shares traded sharply lower Friday after the memory chip maker cautioned that near-term earnings would fall short of Wall Street forecasts as global demand continues to be impacted by the U.S.-China trade dispute.
Micron said diluted earnings for the three months ending on August 29, the company's s fiscal fourth quarter, came in at 49 cents per share, a figure that was just ahead of the Street consensus forecast of 48 cents per share but down sharply from last year's $3.56 per share total. Group revenues, Micron said, fell 42.3% to $4.87 billion, but again finished just in front of analysts' estimates of a $4.56 billion tally.
Looking into the current quarter, however, Micron said it sees earnings in the region of 35 to 49 cents per share, well shy of the Refintiv forecast of 48 cents per share, with revenues of around $5 billion.
"The DRAM and NAND industry demand growth in the second half of calendar 2019, compared to the first half, is primarily being driven by a normalization of inventories at most customers, and secular growth trends in various end markets," CEO Sanjay Mehrotra told investors on a conference call late Thursday.
"In recent months, we have seen increased demand from customers headquartered in mainland China, some of whom could be making strategic decisions to build higher levels of inventory in the face of increased trade tensions between the U.S. and China, as well as Japan and Korea."
Micron shares were marked 7.3% lower at the start of trading Friday to change hands at $44.93 each, a move that would trim the stock's year-to-date advance to around 42%.
"Commentary on the recovery of the end markets, particularly on the important hyperscale market, as well as other markets is largely consistent with what we would expect as the industry recovers," said BMO Capital Markets analyst Ambrish Srivastava. "Micron did highlight that some companies from China might continue to purchase ahead of their demand given the uncertainty around ongoing trade war, and the impact is likely not going to be short-lived."
"While it is very easy to get negative on an earnings call which failed to meet up to expectations, we are going to stay the course," he added. "The cyclical downturn in the memory cycle will be behind us soon. Micron is coming out as a structurally more profitable company, and we continue to see meaningful upside from current levels."